The Internationalization of Saudi SMEs: A Qualitative Study of ICT and Textile & Apparel SMEs

Abstract

Small and medium enterprises (SMEs) play a vital role in the economic development of countries. They play an important role in terms of production, employment and distribution of income. They also produce essential products either for local consumption or exports. In Saudi Arabia, 74% of the firms are SMEs. However, they contribute to only 20% of the Gross Domestic Product (GDP) (Small Medium Enterprises in Saudi Arabia Report, 2015). Through the establishment of Vision 2030 for Saudi Arabia, the country aims to boost SMEs’ contribution to GDP from 20% to 35% by 2030, as well as to compete with the G20 countries. SMEs can gain several benefits from expanding internationally, such as gaining competitive advantages and growth. Despite the recognized importance of internationalization, there is little knowledge about how Saudi SMEs can expand abroad, due to the lack of studies that focus on this subject (Rafiki, 2020). The purpose of this study is to fill this gap. This study qualitatively explores the internationalization process of Saudi SMEs in ICT and the textile and apparel sector through 23 semi-structured in-depth interviews with business owner-managers. This study (1) acknowledges the obstacles that Saudi SMEs are facing with internationalization; (2) investigates the capabilities and motivation of SME owner-managers for internationalization; and (3) examines the role of product and process innovation, networking and social media for the internationalization of Saudi SMEs. The study contributes to the literature by providing more insight to internationalization theories from the context of a developing economy. The analysis suggests that there are more similarities than differences between the ICT and textile and apparel sectors in terms of internationalization. Saudi SMEs are motivated to expand abroad by both internal and external motivations and capabilities. The research also highlights the importance of innovation for SMEs in both sectors and how beneficial networking can be, as well as how using social media platforms can ease the job of international expansion for SMEs. Another finding the study highlights is the internal and external obstacles Saudi SMEs face and how they can obstruct their international expansion. The study concludes with suggesting policies for Saudi SMEs’ internationalization based on the analysis